Whole Business Securitization Back on the Menu at Sonic

Sonic Industries is returning to the securitization market with seven-year bonds backed by current and future franchise fees, restaurant royalties and other intellectual property.

The deal, Sonic Capital LLC will issue $575 million of notes with a preliminary ‘BBB’ rating from Standard & Poor’s.

Guggenheim Securities is the arranger.

The sponsor was last in the market in 2013 when it issued $155 million in a private transaction; that deal refinance part of the $600 million that it originally issued in 2011.

Sonic, headquartered in Oklahoma City, differentiates itself from its competitors by using a drive-in format where customers remain in their cars and the food is delivered to them. The locations are open throughout the day and have a diverse menu that includes hamburgers, hot dogs, breakfast items, frozen desserts, and beverages, all of which can be customized.

Sonic operates and franchises the largest chain of drive-in restaurants in the U.S. with over 3,500 locations across 45 states. The Sonic system has been in operation for over 60 years and features 1950s-style décor.

Approximately 89% of the store locations are franchised, with the remaining 11% company-owned. Each franchised Sonic drive-in operates under a franchise agreement that requires payments to Sonic of an initial franchise fee and a royalty fee based on a graduated percentage of gross revenues. New franchised stores are expected to open under the current standard license agreement.

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